Understanding HOA Fees: What Residential Buyers Need to Know

Learn how homeowners association fees impact your monthly costs and long-term investment returns.

Marty Appel

Home Equity Specialist

Mutual of Omaha Mortgage

What Are HOA Fees and How Do They Work?

Homeowners association (HOA) fees are monthly or annual charges paid by residents in planned communities, condominiums, and some residential developments. These fees fund the maintenance and management of common areas and shared amenities within the community.

Understanding the Basics

When you purchase a property in an HOA community, you become a member of the association and are required to pay dues. These fees typically cover:

• Common area maintenance – landscaping, parking lots, and recreational facilities
• Building repairs and improvements – roof replacements, exterior painting, and structural maintenance
• Utilities for shared spaces – lighting, water, and electricity for common areas
• Insurance and legal fees – liability coverage and professional services
• Administrative costs – management staff, accounting, and record-keeping

HOA fees are typically collected monthly, though some communities charge quarterly or annually. The amount varies significantly based on the community's amenities, location, and maintenance requirements.

How Fees Are Determined

The HOA board creates an annual budget based on anticipated expenses and divides this total among all property owners. If unexpected repairs arise, the board may assess special fees to cover these costs. It's important to understand that HOA fees can increase over time as maintenance needs evolve and inflation affects service costs.

Comparing HOA Costs Across Different Residential Communities

HOA fees vary dramatically depending on several factors. Understanding these differences can help you compare communities and budget appropriately.

Factors That Influence Fee Amounts

Location and property values: Communities in desirable areas or with higher property values typically charge higher HOA fees. Urban condominiums often have higher fees than suburban single-family home communities.

Amenities offered: Communities with pools, fitness centers, golf courses, or gated security features charge more than those with minimal amenities. Luxury developments can have fees exceeding $500 monthly.

Community size: Smaller communities may have higher per-unit fees because maintenance costs are spread among fewer properties. Larger communities can distribute expenses more broadly.

Age of the community: Older communities may charge higher fees due to increased maintenance and potential reserve fund needs for major repairs.

Typical Fee Ranges

Average HOA fees in the United States range from $100 to $300 monthly for single-family home communities, while condominium associations often charge $200 to $500 or more. Luxury communities can exceed these amounts significantly. Always request the HOA's financial statements and budget projections before purchasing.

Questions to Ask Before Buying a Home with HOA Requirements

Due diligence is essential when considering a property with HOA fees. Ask these critical questions before making your purchase:

Financial Questions

• What is the current monthly HOA fee, and what is the history of increases over the past five years?
• Are there any pending special assessments or planned major repairs?
• What percentage of the budget goes toward reserves for future repairs?
• Can the HOA provide a detailed breakdown of how fees are allocated?
• What happens if I cannot pay my HOA fees?

Governance and Rules Questions

• What are the HOA's rules regarding exterior modifications, pet policies, and rental restrictions?
• How often are board meetings held, and can homeowners attend?
• What is the process for disputing fees or challenging HOA decisions?
• Are there any pending lawsuits involving the HOA?

Amenities and Services Questions

• What amenities are included, and which require additional fees?
• How well-maintained are the common areas?
• What services does the HOA provide, and are they contracted to third parties?

Pro Tip: Request the HOA's Covenants, Conditions, and Restrictions (CC&R) document and review it carefully. This legal document outlines all rules and regulations you must follow as a homeowner.

Making an Informed Decision: Weighing Benefits Against Costs

Deciding whether to purchase a home with HOA fees requires balancing the costs against the benefits and your personal preferences.

Advantages of HOA Communities

• Property value maintenance: HOAs enforce standards that help preserve neighborhood appearance and property values
• Amenities access: Residents enjoy shared facilities like pools, gyms, and community centers
• Reduced maintenance burden: The HOA handles common area upkeep, freeing you from these responsibilities
• Community connection: HOAs foster neighborhood engagement and social opportunities
• Dispute resolution: HOAs provide mechanisms for addressing neighbor conflicts

Disadvantages to Consider

• Mandatory fees: You must pay HOA dues regardless of whether you use amenities
• Potential fee increases: Fees can rise significantly, impacting your monthly budget
• Restrictions on freedom: HOA rules may limit how you modify your property or use your home
• Special assessments: Unexpected major repairs can result in substantial additional costs
• Resale considerations: Some buyers avoid HOA communities, potentially limiting your buyer pool

Making Your Decision

Consider your lifestyle, budget, and long-term plans. If you value community amenities and don't mind following rules, an HOA community may be ideal. If you prefer independence and minimal additional costs, a non-HOA property might suit you better.

Calculate the true cost of homeownership by adding HOA fees to your mortgage, property taxes, insurance, and maintenance estimates. This comprehensive view helps you determine if the property fits your financial situation.

Before signing any purchase agreement, thoroughly review all HOA documentation, attend a board meeting if possible, and speak with current residents about their experiences. This investment of time can prevent costly surprises and ensure you make a decision aligned with your goals and values.